Loan guarantee

A loan guarantee is a promise made by one party, called the guarantor, to pay back a loan if the borrower fails to do so. It provides reassurance to lenders that the loan will be repaid, reducing their risk. This arrangement often helps borrowers access financing they might not qualify for on their own, such as small businesses or individuals with limited credit history. The guarantor’s commitment can be a government, a company, or an individual, and they assume responsibility for the debt if the primary borrower cannot meet their repayment obligations.